Harmony Gold Mining Co. Ltd. · JSE:HAR
Harmony Gold Mining — Q3 FY2013 Earnings Presentation
49 slides from Harmony Gold Mining's earnings presentation, May 3, 2013
Slide 1: Q3 FY13
Q3 FY13 GRAHAM BRIGGS FRANK ABBOTT 3 May 2013 1 w w w . h a r mw onwyw. c. hoa. zr m a ony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 2: Safe Harbour Statement
Private Securities Litigation Reform Act Safe Harbour Statement This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the safe
Slide 3: Agenda
Agenda 1 Gold price reality 2 Q3 FY13 results 3 Financial stability 4 Papua New Guinea 5 Adding value to the mine communities 6 Conclusion 3 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 4: Gold price reality
Gold price reality www.harmony.co.za
Slide 5: Gold price – US$/oz and R/kg
Gold price – US$/oz and R/kg 9 months YTD¹ 9 months YTD¹ % Mar 2013 Mar 2012 change R/kg 462 982 419 007 10 Gold price received US$/oz 1 672 1 703 (2) Exchange rate R/US$ 8.61 7.65 13 • Post the quarter the gold price has dropped dramatically ≈ US$1 400/oz • Harmony has implemented actions to reduce
Slide 6: Curbing costs in South Africa
Curbing costs in South Africa • Capital expenditure to be reprioritised and reduced by approximately R400m for FY14 • A further R400m saving to come from – reducing services and corporate costs – review/renegotiate all external consultants and supply contracts – various labour initiatives • Shaft or
Slide 7: Improvement initiatives in PNG
Improvement initiatives in PNG Hidden Valley 3 areas are being focused on to return the mine to profitability • primary crusher being replaced – full use of overland conveyor – ore will no longer be hauled to the plant, resulting in cost saving – enable ramp-up of mining and improved mining grades •
Slide 8: Good management of capital (Rm)
Good management of capital (Rm) Rm 4 500 R4.1bn 4 000 R3.8bn R3.5bn 848 3 500 R3.2bn 515 481 R3.0bn 72 3 000 R2.8bn 406 519 301 365 310 66 2 500 723 289 296 600 570 533 617 518 2 000 1 500 2 149 2 113 2 251 2 177 1 000 1 921 1 827 500 - Planned FY11 Actual FY11 Planned FY12 Actual FY12 Planned FY13
Slide 9: Good management of capital (US$m)
Good management of capital (US$m) US$m 600 US$545m 500 US$467m 112 US$437m US$405m 64 US$396m US$393m 400 54 60 9 9 48 41 40 37 79 60 38 88 75 300 88 67 62 200 279 298 262 261 247 253 100 - Planned FY11 Actual FY11 Planned FY12 Actual FY12 Planned FY13 Forecast* FY13 Maintenance capital (SA) Growth
Slide 10: Revised guidance on capex
Revised guidance on capex Rm Capital expenditure (Rbn) US$m Capital expenditure (US$m) 6.0 800 5.1 700 675 5.0 600 4.1 4.1 545 543 4.0 500 3.0 400 300 2.0 200 1.0 100 - - FY13 FY14 FY15 FY13 FY14 FY15 Guidance (Aug '12) Revised guidance (May '13) Guidance (Aug '12) Revised guidance (May '13) Exchang
Slide 11: Quarter 3 FY13 results
Quarter 3 FY13 results www.harmony.co.za
Slide 12: Safety remains our first priority
Safety remains our first priority • Regrettably 2 fatalities • Lowest quarterly LTIFR of 5.15 in history of Harmony • Significant safety achievements during the quarter were: – Masimong and Free State Metallurgy achieved 1 500 000 fatality free shifts – Target 3 achieved 1 000 000 fatality free shif
Slide 13: Key features of the quarter
Key features of the quarter Quarter on quarter • Lowest recorded quarterly LTIFR² • Evander sale transaction completed • 6% decrease in underground grade – after increasing 3 consecutive quarters • Gold production decreased by 15% to 7 699kg (247 529oz) • Headline loss per share* of 47 SA cents (5 U
Slide 14: March quarter's seasonality explained
March quarter’s seasonality explained • Slow start up after the festive season • Metallurgical plants continue to run with surface tonnage until end of December kg Total Harmony (excluding Kusasalethu) 10 000 8 000 6 000 4 000 2 000 - Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 De
Slide 15: Grade trending up, slightly down in quarter
Grade trending up, slightly down in quarter g/t Harmony underground recovered grade 5.00 4.80 4.60 4.40 4.20 4.00 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Recovered grade 15 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 16: Development grades
Development grades cmg/t Development sample grade is higher than life of mine 1350 reserve grades for the past 6 quarters 1300 1250 1200 1150 1100 1050 1000 Dec 11 Qtr Mar 12 Qtr Jun 12 Qtr Sep 12 Qtr Dec 11 Qtr2 Mar 12 Qtr2 Sampled average cmg/t all reefs 2012 LOM Reserve grade cmg/t 16 www.harmony
Slide 17: Group operating results (q-on-q)
Group operating results (q-on-q) % Mar 2013 Dec 2012 change kg 7 699 9 074 (15) Gold produced oz 247 529 291 734 (15) R/kg 470 030 479 801 (2) Gold price US$/oz 1 639 1 722 (5) R/kg 362 491 310 858 (17) Cash operating costs US$/oz 1 264 1 115 (13) Underground recovery grade g/t 4.50 4.77 (6) Rm 821
Slide 18: Group operating results (9 months YTD)
Group operating results (9 months YTD¹) 9 months YTD¹ 9 months YTD¹ % Mar 2013 Mar 2012 change kg 26 786 27 004 (1) Gold produced oz 861 188 868 230 (1) R/kg 462 982 419 007 10 Gold price US$/oz 1 672 1 703 (2) R/kg 319 548 273 625 (17) Cash operating costs US$/oz 1 154 1 112 (4) Underground recover
Slide 19: Group operating results (9 months YTD) (excluding Kusasalethu)
Group operating results (9 months YTD¹) (excluding Kusasalethu) 9 months YTD¹ 9 months YTD¹ % Mar 2013 Mar 2012 change kg 24 734 22 962 8 Gold produced oz 795 215 738 245 8 R/kg 463 566 419 773 10 Gold price US$/oz 1 674 1 707 (2) R/kg 300 818 274 553 (10) Cash operating costs US$/oz 1 086 1 116 3 U
Slide 20: Kusasalethu
Kusasalethu • 90% of workforce back at work • ≈ 2 500kg lost in gold production (up to March 2013) • Code of Conduct signed to ensure – safety and security of employees – compliance with company procedures • Employer-employee relationship re-established • AMCU represents 60% of Kusasalethu workforce
Slide 21: Phakisa ventilation rehabilitation
Phakisa ventilation rehabilitation • Freddies 3 shaft serves as ventilation shaft • Shale resulted in major damage to shaft – resulting in ventilation to Phakisa being blocked • Once the shaft and cavity are filled, the void-filling will stop the shale run • A shaft sinking and re-lining arrangement
Slide 22: Total costs and free cash flow (R/kg)
Total costs and free cash flow (R/kg) R/kg Total Harmony 500 000 R19 066/kg¹ 450 000 R107 539/kgª 400 000 350 000 300 000 250 000 200 000 150 000 100 000 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 13-Mar Cash Operating Cost R/kg Maintenance capital R/kg Growth capital R/kg
Slide 23: Total costs and free cash flow (US$/oz)
Total costs and free cash flow (US$/oz) US$/oz Total Harmony 2 000 1 800 1 600 US$57/oz¹ US$375/ozª 1 400 1 200 1 000 800 600 400 200 - Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 13-Mar Cash Operating Cost US$/oz Maintenance capital US$/oz Growth capital US$/oz Revenue US$
Slide 24: Financial stability
Financial stability www.harmony.co.za
Slide 25: Net cash/(net debt) position compared to peers
Net cash/(net debt) position compared to peers US$m Net Cash/(Net Debt) – US$m as at 31 Dec 2012 AngloGold Goldcorp Harmony Harmony Sibanye Gold Fields Ashanti Newcrest Newmont Barrick 1 000 135 16 0 -1 000 -459 -2 000 -1 263 -3 000 -2 627 -4 000 -3 225 -5 000 -4 737 -6 000 -7 000 -8 000 -9 000 -10
Slide 26: Cash flow summary (q-on-q) – Rand
Cash flow summary (q-on-q) – Rand Mar 2013 Dec 2012 Extracts from the cash flow statement (Rm) (Rm) Cash flow from operations before exploration 361 1 552 Exploration expenditure (157) (160) Income and mining taxes paid (70) (221) Proceeds from sale of Evander 1 264 69 Capital expenditure (855) (1 0
Slide 27: Cash flow summary (q-on-q) – US$
Cash flow summary (q-on-q) – US$ Mar 2013 Dec 2012 Extracts from the cash flow statement (US$m) (US$m) Cash flow from operations before exploration 41 179 Exploration expenditure (18) (18) Income and mining taxes paid (8) (25) Proceeds from sale of Evander 142 8 Capital expenditure (96) (121) Divide
Slide 28: Income statement (q-on-q) – Rand
Income statement (q-on-q) – Rand Mar 2013 Dec 2012 % Extracts from income statement and operating results (Rm) (Rm) change Revenue 3 528 4 613 (24) Production costs (2 707) (2 980) 9 Cash operating costs (2 791) (2 821) 1 Inventory movements 84 (159) >100 Operating profit as per operating results 82
Slide 29: Income statement (q-on-q) – US$
Income statement (q-on-q) – US$ Mar 2013 Dec 2012 % Extracts from income statement and operating results (US$m) (US$m) change Revenue 395 532 (26) Production costs (303) (344) 12 Cash operating costs (312) (325) 4 Inventory movements 9 (18) >100 Operating profit as per operating results 92 188 (51)
Slide 30: Income statement (9 months YTD) – Rand
Income statement (9 months YTD¹) – Rand 9 months YTD¹ 9 months YTD¹ % Extracts from income statement and operating results Mar 2013 (Rm) Mar 2012 (Rm) change Revenue 12 419 11 235 11 Production costs (8 556) (7 271) (18) Cash operating costs (8 559) (7 360) (16) Inventory movements 3 89 (97) Operati
Slide 31: Income statement (9 months YTD) – US$
Income statement (9 months YTD¹) – US$ 9 months YTD¹ 9 months YTD¹ % Extracts from income statement and operating results Mar 2013 (US$m) Mar 2012 (US$m) change Revenue 1 442 1 469 (2) Production costs (993) (950) (5) Cash operating costs (993) (962) (3) Inventory movements - 12 (100) Operating prof
Slide 32: Papua New Guinea
Papua New Guinea www.harmony.co.za
Slide 33: MMJV – Wafi gold zone
MMJV – Wafi gold zone Eastern margin area • Highly significant intercept located between Golpu and the A zone mineralisation • WR457: 66m @ 2.56 g/t Au (114m) Includes: 30m @ 4 g/t Au from 150m • Significant potential for repetition of Link zone style high grade Au mineralisation • Highlights gold p
Slide 34: MMJV – Golpu
MMJV – Golpu • Record drill production (14 664 m) • Lift 1 focus – Better continuity of high grade in upper levels than currently modelled – Overall positive impact on metal content Advanced Argillic (High As zone) 5140 RL and metallurgy shallows to the north – Argillic overprint (which negatively i
Slide 35: MMJV – Golpu drilling results – lift 2
MMJV – Golpu drilling results – lift 2 • Drill results continue to firm up model with very encouraging intercepts • Spiky gold grades up to 110 g/t Au were encountered in WR444 in the core of the orebody • Grade spikes were evident in drill core, associated with late crosscutting veins containing bl
Slide 36: MMJV – Golpu's future
MMJV – Golpu’s future • Project optimisation work focused on modular, staged project delivery with lower capital intensity • Optimisation and exploration work likely to continue during whole of FY14 • Project activities in FY14 will be focused on better project definition through a drill program, wh
Slide 37: PNG exploration (MMJV and Harmony 100%)
PNG exploration (MMJV and Harmony 100%) Amanab • Mapping and surface sampling completed • +1km surface Au geochem anomaly associated with outcropping mineralised quartz sulphide veins Lihir Amanab Mt Hagen • Tollgate review completed with withdrawal recommended Frieda River Indonesia Ok Tedi Porgera
Slide 38: Tari Project – Lake Kopiago (Harmony 100%)
Tari Project – Lake Kopiago (Harmony 100%) • Drilling commenced • Reconnaissance 7 holes/3 500m • Targets mineralised magnetic intrusive concealed below dari limestone • Initial holes intersected pyrrhotite dominated (distal) skarn alteration • Assays pending 38 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 39: Adding value to the mine communities
Adding value to the mine communities www.harmony.co.za
Slide 40: Handover of sport fields
Handover of sport fields 40 www.harmony.co.za FY 2013 Q1 Q2 Q3 Q4
Slide 41: What is planned for Merriespruit 3 project
What is planned for Merriespruit 3 project • 120 hectares of land transferred to local council • Approximately 500 rental units • Green theme – borehole and dam for gardens, waste recycling unit envisaged, solar power water heating for all units • Complex facilities will include – sport area for dif
Slide 42: In conclusion
In conclusion www.harmony.co.za
Slide 43: Working towards meeting expectations
Working towards meeting expectations • Improved safety • Disposed of non-core assets – Evander and Rand Uranium • Net cash position • Capital expenditure funded entirely by operations • Austerity measures implemented to achieve strategic objectives • Committed to our social responsibilities • Levera
Slide 44: Strategy FY14
Strategy FY14 A global gold mining company - growing gold production and profits, paying dividends to shareholders Safely delivering on projects Optimise operational delivery and operational plans Grow the company Generate profits Growth in production Growth and profits Sharing profits with Sharing
Slide 45: An exciting investment proposition
Henrika Basterfield Investor Relations Manager Tel: +27 (0)11 411 2314 Mobile: +27 (0)82 759 1775 Email: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0)11 411 2037 Mobile: +27 (0)82 888 1242 Email: marian@harmony.co.za JSE (HAR) An exciting NYSE (HM
Slide 46: Appendix
Appendix www.harmony.co.za
Slide 47: Benchmarking our grade
Benchmarking our grade Adjusted (-5%) Actual grade Actual grade Mineral reserve Actual grade Actual grade (g/t) to compare (g/t) achieved (g/t) achieved Mine grade (g/t) (g/t) achieved in achieved in with recovery in in June 2012 FY12 Q1 FY13 grade (g/t) Q2 FY13 Q3 FY13 Kusasalethu 6.30 5.99 4.71 4.
Slide 48: Our FY16 targets
Our FY16 targets Expected potential Average potential Actual Q1 FY13 Actual Q2 FY13 Actual Q3 FY13 Operation ounces in FY16 ounces in FY16 production production production (annual) (per quarter) Kusasalethu 260 000 - 300 000 oz 65 000 -75 000oz 51 473oz 12 925oz 1 575oz Doornkop 185 000 - 200 000 oz
Slide 49: An exciting investment proposition
Henrika Basterfield Investor Relations Manager Tel: +27 (0)11 411 2314 Mobile: +27 (0)82 759 1775 Email: henrika@harmony.co.za Marian van der Walt Executive: Corporate and Investor Relations Tel: +27 (0)11 411 2037 Mobile: +27 (0)82 888 1242 Email: marian@harmony.co.za JSE (HAR) An exciting NYSE (HM
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